US: Four states sue government over tax bill

Four states filed a federal lawsuit Tuesday over a tax overhaul bill passed by President Donald Trump and Congress Republicans last year.

New York, New Jersey, Connecticut and Maryland sued the United States government, saying that the 2017 tax bill unfairly hurts people living in populous and Democrat-leaning states. The bill caps the federal deduction for state and local taxes (SALT) at $10,000.

Because the deduction was so popular among residents of many high tax states like New York, residents of these states, especially homeowners, will likely see their tax bill increase significantly.

“New York will not be bullied,” New York Attorney General Barbara Underwood said in a statement. “This cap is unconstitutional – going well beyond settled limits on federal power to impose an income tax, while deliberately targeting New York and similar states in an attempt to coerce us into changing our fiscal policies and the vital programs they support.”

The lawsuit was filed in the U.S. District Court for the Southern District of New York.

“Eliminating the SALT deduction will jack up taxes for more than half a million Marylanders,” Maryland Attorney General Brian Frosh said in an announcement. “It is an attack on state sovereignty. It will reduce funding for local law enforcement and for construction of infrastructure statewide, and it will cripple our ability to educate our kids.”

The Tax Cuts and Jobs Act was extremely controversial as it moved through Congress because it drastically lowered tax rates for corporations while potentially raising them for many individuals.

The conservative-leaning Tax Foundation think tank argued that the lawsuit would likely not succeed.

“[The lawsuit] may be more of a political exercise than a legal one, as a judge is unlikely to rule that the SALT deduction violates either the Equal Protections Clause or the Tenth Amendment,” the think tank said in a statement.

“The concern that high state taxes might harm the competitiveness or attractiveness of a state like New York or Connecticut is a valid one, but the solution lays with revisiting those state tax rates rather than meritless litigation.”